Tax structure, human capital, and inclusive growth: A sub‐Saharan Africa perspective

Abstract

This study examines the critical role of tax structure in the human capital‐inclusive growth nexus. We deploy the fixed effects model to investigate this relationship in 26 sub‐Saharan African countries between 1995 and 2014. The study explores aggregate and disaggregated taxes as well as per capita public expenditures on education and health. Our results indicate that human capital measures exert a direct strong and positive effects on inclusive growth. Also, the results reveal that aggregate and disaggregated taxes largely influence inclusive growth positively. In essence, human capital and taxes are found to be viable options to promote growth inclusiveness. On the interaction, the results indicate that direct and indirect taxes positively influence inclusive growth through health measure of human capital while only trade tax facilitates education impact on inclusive growth. Hence, addressing resource paucity through tax and expanding the investment in education and health is vital and should be the key goals of the policymakers in the SSA region.